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HomeBusinessNational shutdown and beyond: steps businesses can take to manage risk

National shutdown and beyond: steps businesses can take to manage risk

Johannesburg - The strike action instigated by trade union federations Cosatu and Saftu raises some valid concerns in regard to the living cost crisis faced by many South Africans.

The trade union federations have called on all non-essential workers to down tools and partake in strike action on Wednesday, August 24.

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They are calling on the government to intervene in the cost of the living crisis faced by the country, amid rising fuel costs, unemployment, and the proposed privatisation of state-owned entities.

The effects of the countrywide shutdown will resonate through every sector of the economy.

The hardest hit will be SMEs and businesses at large.

The Institute of Risk Management South Africa (Irmsa) has warned of the “possible dire economic consequences” of the planned national shutdown set to take place across South Africa today.

Irmsa chief executive, Pat Semenya, said the envisaged national shutdown featuring the country’s biggest trade union federations would have a detrimental effect on the already weak economy.

“While we respect workers’ dissatisfaction with the government, the planned national shutdown will only further destabilise the country’s already fragile economy,” said Semenya.

While the strike action that is to be carried out is expected to be organised and peaceful it is important to note that civil action, necessary as it may be, does have detrimental effects on the economy and livelihoods of many.

Last year’s civil unrest left almost two million jobless and cost the country over R50 billion and horrified South Africans.

Before the unthinkable occurred, including Sasria cover in insurance policies for most businesses was met with some hesitation and scepticism. Despite its nominal fee, South African business owners questioned its value and importance.

“That’s no longer the case,” says Alex Terblanché, Head of Auto & General Business Insurance. “Following the July 2021 riots, Sasria cover is being added to more business insurance policies than ever before and Sasria, or ‘looting insurance’ as it is often referred to, is one of the first queries we receive from business owners.”

Sasria is the only non-life insurer that provides cover for loss or damage to insured property caused by special risks such as political, social, or economic motivated malicious acts, riots, strikes, terrorism, and public disorder.

While the cover has always been offered, it’s up to the business owner whether they would like to include it, or not.

Entrepreneurs need to start thinking beyond the conventional causes of business disruptions and manage risk accordingly to make sure their businesses can overcome whatever challenges they may potentially face.

Terblanché notes that damage-based Business Interruption cover is also increasing in popularity and since June 2020, more small businesses are requesting it, and are adding it to their insurance portfolio. Business Interruption cover is designed to protect business owners against the loss of turnover, sales, revenue, or income as a result of loss of or damage to their business assets.

Traditionally, insurance has been seen as a grudge purchase, but this false perception is starting to change.

“SMEs are becoming more risk-aware – risks that were previously deemed to be ‘impossible’ or ‘highly unlikely’. What’s clear is that it’s no longer just about protection against damage and theft, but against financial losses that could temporarily or permanently stop the business from operating,” says Terblanché.

Small business owners should consider risk management and mitigation as a valuable form of insurance against any eventuality. It will help them protect the organisation that they worked hard to create.

“Risk management is a vital element of business success. These steps can help put SME owners on the path to sustainability,” says Tom Stuart, chief marketing officer of SME service provider Lulalend.

1. Insure your businesses and assets

There are different types of insurance that are required by specific business sectors, while other insurance products offer you an assurance that your business will continue if something happens to its owner. It’s a good idea to get some expert opinions to help you make sure you have the right insurance products in place. Insure your businesses and assets.

2. Limit risky customers

If you have just started your business, make sure you avoid customers who could possibly default on invoices or make late payments. It’s helpful to have some clear criteria for customers, and also make sure that your payment terms are clear and agreed upon before you sign any servicing contracts. It’s also important to be strict about credit checks and insist on payment in advance if you have any doubt.

3. Quality assurance

Test the products or services that you sell to make sure they offer quality and value for money. These tests should be repeated often as it helps protect against customer complaints or any financial claims based on poor quality or service delivery.

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